Free PEP book offer

To read all the advertisements, you would think that getting a personal equity plan is akin to taking your vitamins - something everybody should do blindly.

But you should only invest money you will not need in the next three to five years, because the value of a PEP investment can fall as well as rise, unlike a building society savings account.

And the longer you invest for the more likely you will end up in profit and be better off than having had your money in a savings account.

Beware of PEP adverts trumpeting strong performance in the past year or total performance over a longer period. Look instead for consistent performance over a number of individual years. Spectacular performance in one year can mask poor performance in other years.

For example, the Johnson Fry Slater Growth fund, which produced profits of 63 per cent over the last year, is the top performing unit trust at present. If you look at its cumulative performance over three years, the fund is again number one among its peer group of growth funds.

However, go back to the dark days of 1994 and you find that the fund dropped 16 per cent, compared with a decline of only 11 per cent for the average fund.

These and other issues involved in choosing unit trusts and PEPs are covered in Picking the Right Unit Trust with PEP Secrets, published by Pitman's as part of its Financial Times Investor Series. The book normally costs pounds 21.99, but the Independent on Sunday has 20 free copies to give away to readers.